It is not logical to repay debts that are illegitimate

The People of Europe should audit their creditors

21 January 2011 by Eric Toussaint

Debt default and the denial of debt repayment have been linked to a national disaster. These “revelation images” are aimed to make people accept the policies that are being applied.

Interview with Eric Toussaint [1] by Nikitas Kouridakis (Greek daily paper Ethnos tis KyriakisT [2] )

In Ecuador, the debt audit helped delete $3.2 billion

The effort was successful: Ecuador unilaterally eliminated as illegitimate (“illegal” or “odious”) - a debt of 3.2 billion dollars. Despite the embargo of the markets, the consequences for Ecuador have not been tragic. On the contrary, the economy grew by 3.7% in 2010 and is expected to
grow by 5% in 2011.

The Committee’s work in Ecuador has recently been mentioned in the Greek Parliament by Sofia Sakorafa. But could the experience of Ecuador be helpful in Greece? Eric Toussaint thinks so: "While the economies of the two countries are different, the structure of Greek public debt has a lot in common with developing countries.
First, Greece is financing a part of debt in the form of bonds by the Government authorities (“securitization of public debt”), a technique used by Ecuador.
Second, another large part of the Greek debt is in the form of bank loans, which is also the case for developing countries.
Third, as a result of the rescue plan in May 2010, Greece has borrowed from the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
In other words, what is happening in Greece today is not something different from what has happened in many developing countries in recent decades, namely, through the IMF-imposed “Washington consensus”."
Mr. Toussaint sees another common element: “Ecuador’s debt was mainly owed to the banks in the U.S. Ecuador abandoned in 2000 its national currency and adopted the U.S. currency that is the currency of its lender. Similarly Greece has the same currency with its own lenders, such as France and Germany.

The last observation does not mean that defaulting on the debt will necessarily be accompanied by exit from the euro: “There is not an automatic exit from the eurozone if Greece is to stop paying. Greece will have to decide if it wants to remain in the eurozone after a dialogue in the Parliament and with the Greek people.

For Mr. Toussaint, wages, pensions and savings can be secured. “If a state refuses to repay the debt, it saves money. In order to repay the debt, the state is using a very high volume of government spending money that could be used in order to pay salaries, to build public hospitals, schools and public agencies, to act to ensure the security of the country. The states that have defaulted up to now have realized that this has improved their ability to meet their obligations with respect to their citizens.

Also, considering citizens’ deposits, “the public authority must take responsibility and create a large public financial sector. The state can cover the cost of strengthening the banking system, by using the assets of the major banks’ shareholders.

Domino effect

Although the reasons that led to the debt increase are different in Greece, Mr. Toussaint insists that the debt is not an issue that is only concerning Greece. “Greeks have to understand that they are not the exception to the rule. What has happened in Greece since April 2010 was repeated in Ireland in October 2010, it will happen again in Portugal, Spain and Italy. It would really be a shame for the Greeks to believe that they are an exception and to fatally accept the terms imposed on them.”

Argentina – Russia. The default has saved them

As a witness in defense of his claim for defaulting on odious debts, Eric Toussaint refers to the Nobel laureate economist J. Stiglitz, who in a 2010 study revealed that the economies of countries such as Russia or Argentina have been in a better financial situation since defaulting and have been able to save money to boost growth.

Playing dirty. Foreign banks to take responsibility

For Mr. Toussaint, Eurobonds are not a solution to our problem. First and foremost, he believes that the conditions for granting loans in Greece should be explored.

The question that we should primarily answer is: “Is it normal for citizens of a country like Greece, to repay a debt that is not legitimate?” If the loans had been made in the interests of citizens with respect for their basic needs and if the banks, mostly French and German, had acted carefully and rationally, then we would say that the debt should be repaid. But the bulk of debt is illegal and the bankers who purchased Greek titles must take their responsibilities. They have entered into loan agreements with unreasonable and illegal terms, and therefore they must accept the cancellation of a significant part of the debt.

Mr. Toussaint characteristically refers to the “excessive military spending in Greece, many of which are due to Franco-German pressure.”


[1Eric Toussaint is one of the most prominent cadre of the anti-globalization movement; historian and political scientist, president of the Committee for the Abolition of Third World Debt (CADTM), member of the association ATTAC and of the international council of the World Social Forum. He has authored several books on the issue of debt, the latest of which deals specifically with the role of the IMF and World Bank.
He has also been a member of the Audit Committee set up by the president of Ecuador, Rafael Correa, in order to avoid a large proportion of Ecuador’s public debt.

[2hird Greek daily paper (100.000 copies), Ethnos tis Kyriakis is centre- left oriented. Original version of the interview published on 9 January 2011:

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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